HH #16

Consumer Spending, Sentiment, and Savings.

Believe it or not, the consumer drives the entire economy. If people don’t buy shit, our GDP falls. If our GDP falls, the market tanks. So, lets walk through a brief timeline of consumer spending, sentiment, and savings to create a picture of the economy.

Starting with Covid:

During Covid, no one was able to leave their houses which naturally led to a decrease in spending. However, this decrease in spending led to a sharp increase in consumer savings (savings rates were near all-time highs of ~15% during Covid)! The consumer effectively built a war chest of dry powder during Covid, but overall sentiment was very low thanks to macroeconomic uncertainty.

2021:

Consumer sentiment about the future of the economy shot up drastically. Covid fears started to dwindle, quantitative easing by the FED bolstered everyone’s pockets, and consumers finally had experiences to start spending money on again (travel, movie theaters, window shopping, dining inside a restaurant, etc.). Basically, all of the good things everyone loves started crawling back to life and everyone had a ton of money to spend on these experiences.

Sure, savings rates may have started to fall, but savings were still at historical highs. And what is the point of saving anything if you can’t spend it?

2022 - 2023:

Inflation started to eat away at consumer savings, but spending has remained high! Two things to digest here:

1. Consumers are still yearning to spend post-Covid lockdown

2. Everything costs more, so naturally you have to spend more on everything including basic needs (food, utilities, and shelter)

Elevated spending over the past 1.5 years has crushed the consumer savings rate (now only at 4%). Yet, sentiment has remained high. Why?

Limited debt burden. A sneaky detail that has lifted consumer sentiment has been the beauty of forebearance. During Covid, nearly all debt obligations went into forebearance (no one had to pay for anything: mortgages, auto loans, student loans, even some credit cards).

However, the party is over.

Forebearance is no longer a common theme. In June, the final piece of the puzzle, student loans, was reinstalled. For over 3 years, consumers have gotten accustomed to not paying their student loans. With an average monthly student loan repayment of $284, this is not a small adjustment to someone’s financial condition.

Spending on luxury goods, besides travel, has already trailed off from the golden year of 2021. Will this trend continue? Or will people refuse to pay their debts? Careful reminder, if consumer sentiment begins to fall and spending decreases, the economy is going to be negatively affected.

Banking: RBC SA 2025 application is now live! This is far earlier than our projections, but RBC is always the first to open their app. For 2024 SA, many new boutiques opened their apps along with M&T Bank and Santander. This is likely the final push for SA 2024 apps, so please submit your apps if you’re looking for an internship in banking. For FT, Citi and Barclays have opened their apps alongside Mizuho and U.S. Bank. FT recruiting is more fragmented than SA, so expect banks to fire off their processes at different times.

Consulting:

More niche applications such as Triangle Insights Group (Life science consulting) and Putnam (Also life sciences) have been released. OC&C's application came out as well as Analysis Group's and Accenture's. Over the coming weeks, more firms will release applications before recruiting tapers off in mid-October.

Buyside: We added 6 new names to the commercial real estate SA section, so be sure to check those out if you’re interested in working with tangible assets. Ares Management also opened up their RE, Industrials app.

Resume Review: For $10, we will conduct a detailed review of your resume to ensure you never need to change it again. Just shoot us an e-mail.

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Happy to help,

Hoos Helpers

HH #16